RIM settles NTP lawsuit for $450m

Research In Motion has settled its remaining differences with its legal nemesis, NTP, paying $450m for the privilege, the erstwhile adversaries revealed today.

In return, NTP will not only suspend the patent infringement litigation it brought against RIM but grant the Canadian firm - and, crucially, RIM's customers - "unfettered" access to the technology it owns. RIM has the right to sub-license NTP's intellectual property. A licensing agreement that puts all this in black and white will be drawn up in the coming weeks.

The $450m figure covers said licence and includes $137m put aside by RIM against damages already awarded against it during the mammoth lawsuit. That leaves RIM having to find $313m, which it will take as a one-off hit to its Q4 FY2005 results. That quarter ended 26 February, and will be reported on 5 April once its licence to NTP's patents has been signed. RIM ended its third quarter with $1.64bn in the bank so it can easily afford the settlement terms. When it announced its Q3 results, the company said it is anticipating sales of $430-455m for Q4, with earnings of 51-57 cents a share. That's likely to come down somewhat once the $313m comes off the bottom line.

A settlement between the firms has been on the cards since the US Court of Appeals ruled last December that RIM had indeed infringed NTP's patents, and sent the case back to the District Court of Eastern Richmond, Virginia that had original ruled in November 2002 in NTP's favour.

More recently, RIM had tried the unusual tactic of claiming NTP's action was invalid since RIM is based in Canada, and US patents are not enforceable there. As we and other observers noted at the time, if that's such a convincing argument why didn't RIM offer it up in the first place? Because it isn't, and NTP clearly didn't fall for it.

Instead, RIM has been forced to cough up, but the settlement paves the way for the company to begin selling its Blackberry Connect software in the US, something it had been prevented from doing by the lawsuit. Blackberry Connect allows non-Blackberry devices to access RIM's push email service, allowing it to grow its user base beyond owners of its own handhelds.

With more than 70 per cent of its revenue coming from hardware sales, that's perhaps a risky strategy - how long will its hardware competitors be willing to partner with it on the software side? But for now the Blackberry brand is sufficiently strong to carry it. ®